They should stop at isolating a few people. Quarantining an entire city or town is highly inconsistent and unreliable. Shown in the movie "Outbreak", when the government quarantined the town of Cedar Creek. Two families tried to escape the isolation. This is an example of how badly a quarantine can effect citizens. In terms of single person isolation; a
patient often lives in a room with negative air pressure to prevent disease from spreading; an ultraviolet light may kill potential pathogens as they're sucked through a HEPA filter. Visitors must wear masks or, in some cases, sterile full-body suits.
I believe the military should not be involved with isolation but if it does get to the point where the government needs to quarantine an area, the military should get involved. Such an example can be found when looking back at the quarantine of the town Ziketan in China after two people died of pneumonic plague. The military did get involved in this incident of the quarantine of 10,000 people.
http://www.timesonline.co.uk/tol/life_and_style/health/article6736993.ece